2021 (4) TMI 1280 - AT - Income Tax

Tribunal reclassifies carbon credit sales pre-01.04.2018 as capital receipts overturning tax assessments. Assessee wins appeals.

The Tribunal revised its order, determining that income from the sale of carbon credits before 01.04.2018 should be treated as capital receipts. As a ... Receipts arising on sale of carbon credits - revenue or capital receipt - HELD THAT:- AS following the decision of the Co-ordinate Bench of this Tribunal in the case of Ambika Cotton Mills Limited and the decision in the Sri Velayudhaswamy Spinning Mills (P) Limited [2015 (4) TMI 132 - ITAT CHENNAI] as also on account of the fact that the legislature has by intent providing for taxing of the receipts from the sale of carbon credits under a special provision of Section 115BBG w.e.f 01.04.2018 and as the appeals relate to the period before this date, the receipts arising to the assessee herein on the sale of carbon credits is held to be capital receipt. Consequently, the order of the learned CIT(A) and that of the learned Assessing Officer on this issue stands reversed. Issues:Assessment of sale of carbon credits as Revenue Receipts for assessment years 2010-11 & 2012-13.Analysis:1. Background:The assessee filed Miscellaneous Petitions against the tribunal's orders for assessment years 2010-11 & 2012-13. The issue revolved around the treatment of the sale of carbon credits as Revenue Receipts based on previous decisions.2. Arguments and Tribunal's Decision:The Ld. AR argued against the action of the Ld. CIT(A) in treating the sale of carbon credits as Revenue Receipts. The Tribunal had previously decided in favor of the assessee but omitted to mention the assessment years 2010-11 & 2012-13 in the order. The Ld. AR requested rectification, while the Ld. DR claimed the years were omitted.3. Revised Order and Analysis:The Tribunal revised Para 22 of the order, emphasizing the legislative intent to tax income from the sale of carbon credits under a special provision. Referring to previous decisions, the Tribunal held that receipts from the sale of carbon credits before 01.04.2018 should be treated as capital receipts. Consequently, the orders of the CIT(A) and the Assessing Officer were reversed, and the appeals for the assessment years 2010-11, 2011-12, 2012-13, and 2013-14 were allowed.4. Conclusion:The Miscellaneous Petitions filed by the assessee were allowed, and the Tribunal's decision was pronounced in the Open Court on 09th April, 2021 at Chennai.This detailed analysis highlights the key legal issues, arguments presented, the Tribunal's decision, and the final outcome of the judgment regarding the assessment of sale of carbon credits as Revenue Receipts for the specified assessment years.